Box: The Prisoner's Dilemma Game

Even though the word "game" suggests light situations and peaceful behavior, game theory is usually applied to rather serious situations. Investigators use game theory in politics and economics to model interactions that involve strong conflicts of interest and competition. To them a game is an interaction between two or more actors, where players try to optimize their pay-offs and make their decisions separately from other players, but anticipate others’ moves.

In game theory, the problem of cooperation is usually analyzed by means of the prisoner’s dilemma game, whereby two suspects in a crime are put into separate cells and are given the option of confessing to or denying an allegation. If they both confess, each will be sentenced to three years. If only one confesses, he or she will be freed and used as a witness against the other, who will receive a sentence of 10 years. If neither confesses, they will both charged with a minor offence and jailed for a year. Obviously a dominant strategy for each prisoner is to confess. As such, trying to maximize their pay-offs separately and, in doing so, competing against each other, together they will produce a suboptimal outcome. To minimize the total punishment for the system consisting of two prisoners, the prisoners should not pursue their dominant strategies but accept a common strategy of rejecting the allegation. When they manage to cooperate in denying the allegation, they can both produce an optimal outcome. The unique equilibrium of this game—a situation when no player can gain from unilaterally switching to another strategy—highlights the principle of suboptimization, when optimization of outcomes for every subsystem does not optimize the outcome for the system as a whole.